By: Andy Satriawan )*
The government has set a 1% increase in the Value Added Tax (VAT) rate, which will come into effect on January 1, 2025. This policy is a mandate of Law Number 7 of 2021 concerning the Harmonization of Tax Regulations (HPP), which aims to increase state revenues while supporting the sustainability of various strategic programs.
With this step, the government hopes to strengthen state finances to fund various pro-people projects and infrastructure development throughout Indonesia.
The Chairman of the Budget Agency (Banggar) of the Indonesian House of Representatives, Said Abdullah, emphasized that this policy was not a sudden decision. The process has been designed in stages, starting from the increase in VAT to 11 percent in 2022, and now reaching 12 percent as targeted in the 2025 State Budget.
Said emphasized the importance of the country’s fiscal sustainability in facing global economic challenges, so that this tariff increase is considered a strategic step that has been carefully calculated.
As part of a fair policy, the government continues to protect the public by exempting VAT on a number of essential goods and services. Basic necessities such as rice, sugar, as well as health and education services, are included in the tax-free category.
Said explained that this step aims to ensure that low-income people are still able to meet their basic needs without being burdened by increased tax rates.
The absence of tax on these strategic goods shows the government’s support for vulnerable community groups while maintaining the purchasing power of the community in general.
On the other hand, the increase in VAT is more focused on luxury goods and services. Thus, the wealthy community group will contribute more to state revenue.
The chairman of the Democratic Party’s DPP, Herman Khaeron, gave his views on this policy. He expressed his belief that the increase in VAT would be accompanied by an increase in pro-people programs and incentives to maintain people’s purchasing power.
Herman assessed that the government had considered the impact of this policy comprehensively, especially in ensuring that its implementation remained in the interests of the wider community.
He also highlighted the role of President Prabowo Subianto in ensuring that the policy is implemented with the principle of balance. President Prabowo emphasized the increase in taxes on luxury goods, while the basic needs of the community remain free from tax burdens.
Herman also added that this policy is expected to strengthen the country’s fiscal capacity to fund various strategic programs. Some pro-people programs that have been designed by the government include free nutritious meals worth Rp71 trillion, free health checks worth Rp3.2 trillion, school renovations worth Rp20 trillion, and the construction of a national food barn worth Rp15 trillion.
In addition, the government also plans to build hospitals in the regions with a budget of Rp1.8 trillion. These programs are designed to improve the quality of life of the community while encouraging equitable development throughout Indonesia.
Minister of Villages, Development of Disadvantaged Regions, and Transmigration, Yandri Susanto, explained that the increase in VAT will provide great benefits for underdeveloped, outermost, and remote villages.
According to Yandri, the additional funds from the tax increase can be used for infrastructure development such as roads, bridges, clean water, and electricity services in villages that have had minimal access. Adequate infrastructure in these villages is expected to boost the local economy and improve the standard of living of rural communities.
Yandri emphasized that taxes are not used for the personal interests of government officials, but to build the country for the prosperity of the people. He invited the public to support this policy because its benefits will be felt directly by rural communities who still need more attention.
In addition, Yandri also highlighted the importance of transparency in the use of tax funds, so that the public can see directly the results of their contributions.
Finance Minister Sri Mulyani Indrawati emphasized that this tax policy was designed with the principle of mutual cooperation. The government wants to ensure that tax contributions are made proportionally according to the community’s ability.
The able group makes a greater contribution, while the vulnerable group gets maximum protection. Sri Mulyani also explained that the government will continue to monitor the implementation of this policy so that it continues to run according to plan and provides real benefits for all levels of society.
The policy of increasing VAT to 12 percent is also seen as an effort to encourage equitable development, especially in areas that have been left behind. With the right allocation of funds, the government is optimistic that this policy can provide a significant positive impact on society. Additional funds from this tax will be used to support various strategic development programs, such as infrastructure development, education, and health.
Overall, the increase in VAT to 12 percent is not only a step to increase state revenue, but is also part of a long-term strategy to create sustainable development.
The government is committed to using this additional revenue as best as possible to support pro-people programs and improve people’s quality of life.
With mature policies and proper implementation, this tax increase is expected to bring great benefits to all Indonesian people, while strengthening national economic resilience amidst increasingly complex global challenges.
)* The author is a contributor to Pertiwi Institute